Google’s IYP killer

In Google creates a new simplified ad unit for local business, Greg Sterling takes a new advert for small to medium enterprise, i.e. the Internet Yellow Pages market, through its paces. Google has been trying to enter the SME market for a while, but from everything we’ve seen their churn has been horrific. This means despite the numerous incentives that Google throws at SMEs to get them to sign up to start Adwords — normally anything from €25-€200 free ads — most SMEs quit within their first year. Google has hinted for a while that it will start a simplified approach that will appeal to small business owners, but has not done much in the market apart from some opening moves in the Local Business Centre.

The classical trifecta are all there: a great landing page, transparent reporting and the ability to buy additional visitors and leads. What makes this particularly interesting (and confrontational to IYPs) is that SMEs can buy traffic and leads based on a ‘cat-locale’ i.e. a combination of location (business or search) and search categories. In addition, typical IYP product add-ons such as a click-to-call are included, except now of course the call ‘whisper’ (the brief introduction at the start of each call before it’s connected) says “This call is brought to you by Google” and the delivered lead is reported in your overview. As you’d expect, reporting also means you see where your clicks and leads are coming from. Pricing is flat rate and contracts can be cancelled quickly.

Google continues to test whether (as IYP wisdom says) you require a real sales force to get SME market penetration. It is interesting that Google’s basic problem is less in sales and more in retention — i.e. customer acquisition seems adequate but their churn is painful. IYPs have started investing, and in a number of cases, succeeding with fully automated solutions to deliver guaranteed click and lead products (common in Europe, but for how long, we shall see) and budget-based packages. If they can do it without customer care, why can’t Google? It seems more likely that Google’s go-to-market and product approach was wrong. Whether they can achieve the penetration they want only with online sign-up, or whether they’ll need to take on a larger cross-media advertising approach, perhaps combined with T-sales, remains to be seen. One positive side effect of Google’s approach up until now (at least for Google) is that although SMEs may not have stuck with Google they are unlikely to have gone back to traditional IYP products since the perception is radically altered once you’ve bought a few clicks at €0.50 each, i.e. Google SME products accelerate the market fragmentation, even if they are not themselves successful. In this way, they become part of the baying pack of dogs trying to bring IYPs down, even if they don’t become the new top dog.

Although this is only a test in a couple of US metros, I can’t believe that IYPs will take this lying down. Google is still pretty dependent on IYP and telco feeds in the US, so I’d expect US IYPs to kick them back where it hurts: this means war.